FROM THE DESK OF DEBORAH WEINSWIG

Private Labels Are Increasingly Important in Apparel Retail, Right? Two of the longest-standing names in UK apparel retail united this week as Marks & Spencer (M&S) bought Jaeger out of administration. The acquisition marks a step-change for M&S, as it has hitherto been a private-label retailer in clothing. Richard Price, head of the M&S clothing and home division, told media outlets, “We have set out our plans to sell complementary third-party brands [in May 2020]… to accelerate our transformation and turbocharge online growth.” We see this as reflecting a broader shift in the European market from private labels to brands. Is Private Label Really a Savior? Some major retailers of clothing and footwear, such as US department stores, have ramped up private-label offerings. However, we question whether all of these launches are truly driven by, and reflective of, consumer demand for private labels: We have seen no indications that there is increasing demand for private-label apparel and, on a global level, we perceive consumers as increasingly migrating to strong brands. While a few major retailers, such as Target, have seen success with private labels, in some other cases, private-label launches are likely to be about troubled legacy retailers trying to pull all possible levers to revive their businesses, and that is more about supply than demand. In the UK, a longstanding focus on proprietary brands did not save department-store Debenhams, while M&S has long struggled to stem sales declines in its clothing segment. In the European market, M&S is not the only retailer of apparel to shift from private-label apparel to third-party brands. In 2020, Sharon White, Chairman of the John Lewis Partnership, indicated that the John Lewis department store would offer less own-brand women’s fashion. In 2019, European apparel e-commerce giant Zalando axed its private-label division, zLabels, and cut its private-label offering to a core of “everyday essentials” in accessories, clothing and footwear—Zalando management noted that it had less need for a private-label collection as it has grown its branded assortment. Moreover, major UK private-label retailer Next built a branded apparel offering under its online “Label” division in 2014, and this has been a driver of Next’s total sales growth in the years since. Consumers Want Brands We argue that brands are more in demand than ever, and that a growing number of consumers are seeking brands that resonate with their lifestyles more than generic, centerground product. This includes big, global and desirable brands from companies that have invested heavily in aspirational marketing and product development (NIKE being an obvious example), and smaller brands such as digitally native vertical brands (DNVBs, also often referred to as direct-to-consumer brands). Names such as Allbirds and Everlane have built niches rather than taking the mass market by storm, concentrating on resonating with pockets of consumers rather than trying to appeal to all. By raising consumer expectations, the accessibility of desirable brands through e-commerce has been a principal driver of demand. Shoppers now enjoy a near-unlimited choice of the world’s brands, rather than being restricted to local selections. Furthermore, underpinned by expanding middle classes in developing economies, this accessibility is a global trend—as applicable in China or India as in Europe or the US. The widening of access is one reason why luxury brands are adapting with ventures into streetwear or brand collaborations with nontraditional partners. In recent years, some have claimed that there is little future in being a retailer of other companies’ brands, due to heightened competition. However, we think this is not universally true and that the ease and choice provided by a retailer aggregating collections from multiple brands will hold enduring appeal with consumers. Monobrand websites and direct-to-consumer offerings will cater to those who have already narrowed their selection by brand, but multibrand platforms will thrive by serving shopping trips where consumers want choice. The difference now is around the channel—a large and growing number of consumers want to do this browsing and selecting online—rather than around the concept of a multibrand offering. Read more about this trend here.

US RETAIL AND TECH HEADLINES

Abercrombie & Fitch Raises Its Fourth-Quarter 2020 Sales and Margin Guidance (January 11) Company press release

• Abercrombie & Fitch has raised its fourth-quarter sales-growth guidance and now expects sales to decline by 5–7%, versus prior guidance of a 5–10% decline. The company expects its gross profit margin to increase by 130 basis points versus its prior expectation of flat to up slightly.
• CEO Fran Horowitz said, “I am proud of our quarter-to-date performance, including the peak holiday selling period. Customers continue to respond favorably to updated product and messaging, and we expect lower promotional depth and breadth to drive gross profit rate expansion in the quarter. Our digital sales continue to be robust, partially offsetting ongoing store challenges, where we have experienced reduced hours of operation, capacity restrictions and closures in EMEA and North America.”

Aptos Enters Into an Agreement To Acquire LS Retail (January 12) Company press release

• Retail technology service provider Aptos has signed a definitive agreement to acquire LS Retail, an Iceland-based provider of software applications and point-of-sale systems for food service, forecourt businesses, hospitality, pharmacy and retail. LS Retail has offices in Asia, Europe, North America and the Middle East.
• With this acquisition, Aptos aims to create a retail technology center that is equipped to support retailers across verticals, tiers and geographies by offering innovative and advanced unified commerce solutions. The acquisition deal is expected to complete in February 2021.

Lululemon Athletica Raises Its Fourth-Quarter 2020 Sales and Earnings Guidance (January 11) Company press release

• Lululemon has raised its fourth-quarter sales-growth guidance and now expects its growth rate to be at the high end of its prior expectation of mid-to-high-teens growth. The company also expects its adjusted EPS growth to be at the high end of its prior expectation of mid-single-digit growth.
• CEO Calvin McDonald said, “We’re pleased with the momentum over the holiday period as our investments in Lululemon and MIRROR allowed us to connect with guests both physically and digitally. We remain confident about our opportunities in 2021.”

Salesforce Launches Loyalty Management To Help Businesses Drive Loyalty Experiences (January 12) Company press release

• Cloud-based software company Salesforce has launched Loyalty Management, a new product to help business-to-business and business-to-consumer companies across industries, including retail and consumer goods, to build engaging and effective loyalty programs.
• Loyalty Management is integrated with Salesforce Digital 360, Service Cloud and Tableau CRM to help businesses deliver a personalized and integrated loyalty offering and measure the loyalty program performance.

Staples Proposes Acquisition of Office Depot in a $2.1 Billion Deal (January 11) Chainstoreage.com

• Office retail company Staples has made an offer to acquire ODP Corporation, whose banners include CompuCom, Office Depot and OfficeMax, for $2.1 billion in cash.
• Office Depot confirmed that it had received Staples’ offer and said that the proposal is under review. This is the third time that Staples has attempted to acquire Office Depot after the deals in 1996 and 2016 were called off over antitrust concerns.

Walmart Partners with Ribbit Capital To Create a New Fintech Startup (January 11) Company press release

• Walmart has entered into a strategic alliance with investment firm Ribbit Capital to create a new fintech startup designed to provide innovative and affordable financial services for Walmart’s customers and associates.
• Walmart will hold the majority stake in the fintech startup and expects to expand the new firm through acquisitions and partnerships with major fintech companies.

EUROPE RETAIL AND TECH HEADLINES

Lidl’s UK Christmas Sales Increase by 17.9% (January 13) Reuters.com

• Discount supermarket Lidl witnessed a 17.9% surge in UK sales in the four weeks ended December 27, 2020 and claimed to be the fastest growing retailer amongst its peers, including Asda, Morrisons, Sainsbury’s and Tesco. Lidl said that the growth was driven by consumers buying more products in-store and shifting away from rivals.
• The company also witnessed a year-over-year increase of 24.8% in its average basket size, fueled by demand for several of its festive products.

Ex-Sainsbury’s CEO Mike Coupe Joins Oak Furnitureland as Chairman (January 12) Retailgazette.co.uk

• Mike Coupe, former CEO of Sainsbury’s, has joined Oak Furnitureland as Chairman. In this new role, Coupe will be expected to drive growth strategies for Oak Furnitureland over the next few years.
• Prior to this new role, Mike Coupe led Sainsbury’s for six years and was instrumental in its takeover of Home Retail Group. Coupe has also worked with various retail businesses such as Asda, Iceland and Tesco.

Retail Footfall Declines by 43.4% in the UK During 2020 (January 11) Retail Insight Network

• The British Retail Consortium’s (BRC) ShopperTrak data has indicated that the total year-over-year footfall in the UK declined by 43.4% in 2020. In December, UK retail footfall in general fell by 46.4%, a 19.3-percentage-point improvement from November. The year-over-year footfall in December on high streets specifically fell by 49.5%—this location type was most affected by the Covid-19 pandemic.
• Helen Dickinson, Chief Executive of BRC, said, “After an encouraging start to the month, Christmas shopper numbers dwindled as December progressed, due in large part to the creation of Tier 4 [Covid-19 lockdown restrictions] in England and increased restrictions elsewhere in the UK.”

JD Sports Raises Profit Expectations (January 11) Company press release

• JD Sports expects its pre-tax profits to be around £400 million ($548 million) for the year ended January 30, 2021, ahead of analysts’ expectations of £295 million ($404 million) for the same period. The improvement in the expectation is primarily due to the increase in online shopping witnessed by the company for the 22 weeks to January 2, 2021.
• The company plans to scale its digital channels further to attract more customers and reduce its in-store retail initiatives.

Alimentation Couche-Tard Initiates Discussions To Acquire Carrefour (January 13) BNNBloomberg.ca

• Canadian convenience store company Alimentation Couche-Tard has entered into the first round of discussions to purchase French grocery retailer Carrefour SA.
• The deal is expected to help Couche-Tard expand its footprint in Europe as it would gain access to a network of Carrefour’s 2,800 supermarkets and 703 hypermarkets.

ASIA RETAIL AND TECH HEADLINES

Nykaa Unveils Beauty Brand e.l.f. Cosmetics in India (January 12) IndianRetailer.com

• Indian beauty retailer Nykaa has launched the internationally popular beauty brand e.l.f. Cosmetics in India, making it available to consumers on the Nykaa mobile app, website and in select Nykaa stores.
• Kory Marchisotto, Chief Marketing Officer of e.l.f. Beauty, said, “We are excited to celebrate the beauty of every eye, lip and face in India. For years, our consumers have been asking us when we will be available in India, and we are proud to bring our products to them with Nykaa. We are also looking forward to reaching new consumers and beauty enthusiasts with our superpowers.”

VF Corporation To Shift Business Operations out of Hong Kong (January 13) RetailNews.asia

• Apparel and footwear retailer VF Corporation, as part of its Asia-Pacific business transformation plan, has announced that it will relocate its operations out of Hong Kong over the next 12 to 18 months, with the first moves set to commence in April 2021.
• The company plans to move the center of its brand operations from Hong Kong to Shanghai and also intends to relocate its Asia Product Supply Hub from Hong Kong to Singapore.

Vietnam E-Wallet MoMo Raises Series D Funding (January 13) TechinAsia.com

• Leading Vietnamese payment app MoMo has announced the conclusion of its Series D funding round, which was jointly led by Warburg Pincus and Goodwater Capital, thereby solidifying its status as one of the most well-funded tech firms in Vietnam.
• According to the company, 25% of the new funding will be utilized to support tech startups in Vietnam through the company’s new fund—MoMo Innovation Ventures.

True Elements Raises $1.4 Million in Funding (January 11) YourStory.com

• Indian health-food startup True Elements has announced that it has secured ₹100 million ($1.4 million) in funding from Maharashtra State Social Venture Fund (MSSVF)—a fund managed by investment management firm SIDBI VC. According to the company, the fresh capital will be utilized to strengthen its brand and product innovation.
• Puru Gupta, Co-Founder of True Elements, said, “Our focus on technology and cost-efficiency has ensured that we are one of the most capital-efficient startups in the country. While we have been profitable so far this year, our endeavor now is to maintain consistent growth in EBITDA margins while scaling up, even with external funds.”

JD.com Establishes JD Technology as Its Fifth Subsidiary (January 12) PanDaily.com

• E-commerce giant JD.com announced the official establishment of JD Technology as its affiliate on January 11, following the integration of its cloud and AI business with JD Digital.
• The company confirmed that former JD Digital CEO Li Yayun has been appointed as the CEO of JD Technology. Song Yang, Vice President of JD.com, will be at the helm for the new unit’s branding, marketing and public relations.